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Africa: Haiti's Debt in Context

AfricaFocus Bulletin
Feb 2, 2010 (100202)
(Reposted from sources cited below)

Editor's Note

"Haiti was the only country in which the ex-slaves themselves were expected to pay a foreign government [France] for their liberty [in 1804]. By 1900, it was spending 80% of its national budget on repayments. ... In 1947, Haiti finally paid off the original reparations, plus interest. Doing so left it destitute, corrupt, disastrously lacking in investment and politically volatile." - historian Alex von Tunzelmann, in London Sunday Times, May 17, 2009

In June 2009 $1.2 billion of Haiti's modern external debt, dating to the Duvalier dictatorship and subsequent international structural adjustment programs, was cancelled. But even after this, Haiti remained saddled with a debt of more than $1 billion. Now France has pledged to cancel its bilateral debt to Haiti, and the IMF has said it will cancel its own debt, including a new loan for $100 million being made available after the earthquake. Cancellation of all the country's external debt, analysts say, is one of the minimal conditions necessary for that country's reconstruction.

This AfricaFocus Bulletin contains a letter from 80 U.S. organizations to U.S. Treasury Secretary Geithner calling for cancellation of Haiti's debt, a background paper on Haiti's debt by Jubilee USA, and a brief description by historian Alex von Tunzelmann on the historical origin of Haiti's debt.

Another AfricaFocus Bulletin sent out today contains commentary on the need for African and international support for Haiti's reconstruction.

For more on Haiti's debt, see particularly
http://www.jubileeusa.org / direct URL: http://tinyurl.com/yjwhb9t

Also see Sophie Perchellet, Éric Toussaint, "Grants to Repay an Odious Debt?" January 18, 2010
http://www.cadtm.org/Haiti-Grants-to-repay-an-odious

For previous AfricaFocus Bulletin's on the issue of African and other developing country debt, see
http://www.africafocus.org/debtexp.php

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

Organizations Unite to Tell Treasury Secretary Geithner: Cancel Haiti's Debt Now and No More Debt for Disaster

January 26, 2010

Today 80 US religious denominations, human rights groups, and development agencies including the Jubilee USA Network, the AFL-CIO, the ONE Campaign and TransAfrica Forum sent a letter to US Treasury Secretary Timothy Geithner, urging him to negotiate immediate debt cancellation for Haiti by the international financial institutions.

As the International Monetary Fund prepares to meet on Wednesday to vote to approve a $100 million emergency loan for Haiti and discuss possible debt cancellation, the groups urge the United States use its leadership to ensure that Haiti's existing debt be cancelled definitively and that any new money comes in the form of grants, not loans.

January 26, 2010

The Honorable Timothy Geithner Secretary of the Treasury

Dear Mr. Secretary:

We are grateful for the US government's efforts to date to mobilize emergency assistance for disaster relief in Haiti.

We are writing today to bring to your attention two specific steps that we believe should be a part of our government's response to the Haiti crisis: (1) support for the cancellation of Haiti's remaining debts; and (2) ensuring that any disaster relief assistance be provided as grants rather than loans.

First, as you know, in June 2009 Haiti secured $1.2 billion in debt cancellation from its major creditors when it reached completion point in the Heavily Indebted Poor Countries (HIPC) Initiative. This was a critical step forward. But even after this relief, Haiti remains saddled with a debt of more than $1 billion.

More than half of Haiti's outstanding debt is owed to the Inter American Development Bank (IDB) ($442 million), the International Monetary Fund (IMF) ($165 million), and the World Bank's International Development Association (IDA) ($39 million) -- institutions where our government has a significant voice on the Executive Board. Haiti is projected to pay at least $100 million in debt payments to these institutions over the next five years unless these debts are cancelled -- and the earthquake now has devastated Haiti's capacity to generate sufficient export revenue to be able to afford these payments.

We have welcomed statements from IMF and IDB officials of their intentions to consider cancellation of Haiti's remaining debt. We urge you to use your voice and vote on the Executive Boards of the IDB, IMF, and World Bank to secure cancellation of Haiti's remaining debts to these institutions. While arrangements are worked out for cancellation, we urge you to call for a moratorium for debt service payments from Haiti to these institutions, without interest accruing.

Second, we welcome the pledges of additional financial assistance from international governments and international financial institutions, as we acknowledge that all available resources must be delivered to Haiti in as timely a manner as possible. However, we urge that all support be in the form of grants instead of loans.

While we were initially concerned when the International Monetary Fund announced its intention to provide $100 million in loan assistance as part of an existing loan agreement that includes some onerous conditions, we welcomed IMF Managing Director Dominique Strauss-Kahn's recent promise that the IMF intends to work to cancel all of Haiti's debt including this new loan. We urge you to work with the IMF to ensure that all assistance, including the new IMF loan, is provided on grant terms and without requirements of existing loans.

We thank you for your consideration of our views on this critical issue.1

Sincerely,

[for list of signatory organizations see
http://tinyurl.com/ybufgog]


Policy Update Debt Cancellation for Haiti: An Important Victory but an Unfinished Agenda

August 2009

[For this background paper plus a wealth of other background resources on Haiti's debt, see
http://www.jubileeusa.org / direct URL: http://tinyurl.com/yjwhb9t

Haiti achieved $1.2 billion in debt cancellation under the Heavily Indebted Poor Countries (HIPC) program in late June 2009. It's an important step - but by no means the end of the story - for a country with a violent past, extreme poverty and faced by recent humanitarian emergencies.

By Mimi Lytje

It has been a very bumpy ride for Haiti towards debt cancellation right from the start, trying to wind its way through the HIPC process. The international debt relief program was set up under the International Monetary Fund and World Bank to reduce impoverished countries debt burden. But the program's strict requirements have often been equaled to an obstacle course for struggling nations.

Despite its substantial debt burden and its status as the hemisphere's poorest country, Haiti was not initially accepted into the HIPC program because it did not meet the technical debt burden indicators. Haiti was officially included in HIPC in 2006 only after these requirements were revised.

After being accepted into HIPC, Haiti was projected to finish the program and receive full cancellation of its debt by September 2008. However the World Bank and IMF repeatedly pushed back the completion point. In the US this led a bi-partisan coalition of 72 Members of Congress to sign a letter to World Bank President Robert Zoellick in February 2009 urging immediate debt cancellation for Haiti. Under pressure from campaigners, in April 2009, the Obama Administration announced it would cover up to $20 million in debt service payments from Haiti until Haiti reached completion point - an important step recognizing Haiti's tremendous need

Haiti achieved its much needed and much anticipated victory at the end of June 2009 when the board of the World Bank finally approved Haiti's progression to completion point under HIPC. Haiti will now have $ 1.2 billion in external debt owed to both bilateral and multilateral creditors such as IMF, World Bank and the US government cancelled.

In a country where more than 76% of the population lives in poverty and only half of the population are able to read, money freed up by debt cancellation can now be spent on poverty reduction.

A history of illegitimate debt

Haiti's legacy of debt began shortly after the country won independence from France and abolished slavery. France threatened to reinvade unless Haiti compensated it for the loss of its "property", including slaves. With French warships positioned off the coast, Haiti gave in to French demands in 1825, and agreed to pay 150 million francs, financed by a loan to a designated French bank in return for recognition of Haiti's sovereignty.

This enormous debt - equal to fourteen times Haiti's export revenues - placed a heavy burden on the new country. Haiti was forced to send any available cash to France, diverting revenues from investments in infrastructure, education and government services. The world's first black republic descended into a spiral of debt and underdevelopment from which it has never recovered.

From 1957 to 1986, Haiti was controlled by the father/son dictatorship of Francois "Papa Doc" and Jean-Claude "Baby Doc" Duvalier. For nearly thirty years they spent huge amounts of foreign assistance to enrich themselves and suppress the Haitian people. This misuse of resources was widely reported, yet donor countries and international financial institutions continued to lend money to the regime.

Surviving a global financial crisis

The fact that Haiti has now received $1.2 billion in external debt cancellation is a step towards justice for the historical injustice Haiti has suffered.

But even with this progress, the story does not end here. This amount only accounts for 2/3 of Haiti's total debt burden. The debt relief will give Haiti some much needed breathing space in their budgets but the 1/3 of the debt burden that hasn't been cancelled has been incurred after 2004. When world leaders agreed to the Multilateral Debt Relief Initiative (MDRI) in 2005 in Gleneagles, it was agreed that only debts accrued through 2004 would be cancelled. The remainder of Haiti's debt has been accrued since then.

The remaining debt is owed mainly to the Inter-American Development Bank and IMF. The World Bank aid Haiti has received after 2004 has come primarily in the form of grants. Haiti also has taken out substantial loans from Venezuela under the "PetroCaribe" agreement. Repayments of the Venezuela loans - despite being given on concessional terms - is expected to reach as much as 1% of GDP in 2013.

Haiti suffered through a series of humanitarian crises in 2008 caused by the devastating effects of four hurricanes. Sharp increases in food and energy prices have also led to an escalation of hunger among the poorest sectors of the population. Now, more than ever, Haiti faces the severe and negative effects the recent downtown in the global economy.

Haiti is not alone: the overall picture for developing countries is bleak and the United Nations Conference on Trade and Development (UNCTAD) predicts a $ 2 trillion financial shortfall for developing countries, along with a 30% drop in exports income. A decline in food production is also likely, as is recurrence of food crises in some parts of the developing countries.

The urgency of the situation has led UNCTAD to call for a temporary moratorium for developing countries on their debt service obligations. The UNCTAD General Secretary Supachai Panitchpakdi has stated that: "In the current global crisis situation both debtor and creditor countries would probably be better served if scarcer foreign exchange earnings in the debtor economies were used for the purchase of imports rather than for debt servicing". Haiti is a prime example of a country that could benefit from such a moratorium.

Since debt cancellation under HIPC can not stand alone and since measures such as responsible lending mechanisms have been widely neglected, Haiti like many other countries in the same situation could very well be headed for another debt crisis.

Building on Haiti's debt cancellation, a moratorium on Haiti's remaining debt is a critical next step in ensuring continued progress and a way out of poverty for this small island state. For more information, and to take action, see http://www.jubileeusa.org or http://www.haitijustice.org.


Excerpt from article in London Sunday Times by historian Alex von Tunzelmann. May 17, 2009

http://www.timesonline.co.uk /
direct URL: http://tinyurl.com/ogxxu2

Just why is Haiti in such a dire situation, so much worse than any other country in the Americas, and as bad as anywhere on Earth? Some blame the United Nations. Some blame the Americans. Some have theories about the collision of global warming with global capitalism. All are careful to point out that the Haitian elite deserves its reputation for being greedy, negligent and kleptocratic. "I think the Haitian people have been made to suffer by God," Wilbert, a teacher, tells me, "but the time will come soon when we will be rewarded with Heaven."

History tells a different story. The appalling state of the country is a direct result of having offended a quite different celestial authority - the French. France gained the western third of the island of Hispaniola - the territory that is now Haiti - in 1697. It planted sugar and coffee, supported by an unprecedented increase in the importation of African slaves.

Economically, the result was a success, but life as a slave was intolerable. Living conditions were squalid, disease was rife, and beatings and abuses were universal. The slaves' life expectancy was 21 years. After a dramatic slave uprising that shook the western world, and 12 years of war, Haiti finally defeated Napoleon's forces in 1804 and declared independence. But France demanded reparations: 150m francs, in gold.

For Haiti, this debt did not signify the beginning of freedom, but the end of hope. Even after it was reduced to 60m francs in the 1830s, it was still far more than the war-ravaged country could afford. Haiti was the only country in which the ex-slaves themselves were expected to pay a foreign government for their liberty. By 1900, it was spending 80% of its national budget on repayments. In order to manage the original reparations, further loans were taken out - mostly from the United States, Germany and France. Instead of developing its potential, this deformed state produced a parade of nefarious leaders, most of whom gave up the insurmountable task of trying to fix the country and looted it instead. In 1947, Haiti finally paid off the original reparations, plus interest. Doing so left it destitute, corrupt, disastrously lacking in investment and politically volatile. Haiti was trapped in a downward spiral, from which it is still impossible to escape. It remains hopelessly in debt to this day.


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

AfricaFocus Bulletin can be reached at africafocus@igc.org. Please write to this address to subscribe or unsubscribe to the bulletin, or to suggest material for inclusion. For more information about reposted material, please contact directly the original source mentioned. For a full archive and other resources, see http://www.africafocus.org


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